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HomeMy WebLinkAbout09/16/2025 09.C. Resolution authorizing the City Manager and/or the Director of Finance & Budget to issue statements of official intent for reimbursing certain capital project expenses with future tax-exempt bond proceeds < `y 1ljlt ii! 'I!I/ s . BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 9.C. For Meeting of: September 16, 2025 ITEM TITLE: Resolution authorizing the City Manager and/or the Director of Finance & Budget to issue statements of official intent for reimbursing certain capital project expenses with future tax-exempt bond proceeds SUBMITTED BY: Craig Warner, Director of Finance & Budget Kimberly Domine, Financial Services Manager SUMMARY EXPLANATION: The City of Yakima appoints the City Manager and/or Director of Finance & Budget as authorized officials to issue statements of official intent for reimbursing certain capital project expenses with future tax-exempt bond proceeds. This action ensures compliance with U.S. Treasury Regulation Section 1.150-2, which governs the reimbursement of prior expenditures from tax-exempt obligations. When a capital project's costs are expected to be reimbursed through such bonds, the designated official will sign an Official Intent Certificate (see Exhibit A) documenting the project, funding source, and maximum bond amount. Approval to issue the actual bonds will occur separately by ordinance. Signed certificates will be maintained as public records. ITEM BUDGETED: N/A STRATEGIC PRIORITY 24-25: A Resilient Yakima RECOMMENDATION: Adopt Resolution. ATTACHMENTS: Resolution_2025 reimbursement delegation-City of Yakima Summary of Reimbursement Rules.pdf 217 RESOLUTION NO. R-2025- A RESOLUTION of the City of Yakima, Washington, appointing the City Manager and/or the Director of Finance & Budget for the purpose of designating certain expenditures for reimbursement from tax-exempt bonds that may be authorized and approved by the City for issuance in the future. WHEREAS, the City of Yakima, Washington (the "City") issues tax-exempt obligations, including bonds, notes, and leases from time to time for the purpose of financing its governmental activities; and WHEREAS, the United States Department of the Treasury has promulgated Regulations limiting the ability of the City to use the proceeds of tax-exempt obligations for reimbursement of prior expenditures; and WHEREAS, Section 1.150-2 of the Regulations permits the City to appoint one or more officials for the purpose of identifying and qualifying capital projects for reimbursement purposes; and WHEREAS, any such declaration of official intent to reimburse must not be made as a matter of course or in an amount substantially in excess of the amount expected to be necessary for the proposed project; and WHEREAS, authorization and approval of such bonds shall be made by separate ordinance of the City Council prior to issuance; now, therefore BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Council hereby appoints and designates the City Manager (the "City Manager") and/or the Director of Finance & Budget (the "Director of Finance & Budget" and together with the City Manager, each an"Authorized Representative") as the officials responsible for issuing statements of official intent in compliance with Treasury Regulation Section 1.150-2. Upon a determination by the Authorized Representative that the costs of a particular capital project may be reimbursed from the proceeds of tax-exempt obligations of the City, the Authorized Representative is authorized and directed to execute a certificate of official intent, substantially in the form attached hereto as Exhibit A. The signature of one Authorized Representative shall be sufficient. Each certificate so executed shall become a part of the official records of the City available for public inspection and review. ADOPTED BY THE CITY COUNCIL this 16th day of September, 2025. Patricia Byers, Mayor ATTEST: Rosalinda Ibarra, City Clerk 218 EXHIBIT A FORM OF OFFICIAL INTENT CERTIFICATE Pursuant to Resolution No. of the City Council of the City of Yakima, Washington (the"City"), the undersigned, Authorized Representative of the City hereby states as follows: Section 1. The City reasonably expects to reimburse the expenditures described herein with the proceeds of tax-exempt debt to be incurred by the City (the"Reimbursement Bonds"). Section 2. The maximum principal amount of Reimbursement Bonds expected to be issued i s $ [STATE THE MAXIMUMAMOUNT OF THE TAX-EXEMPT BONDS EXPECTED TO BE ISSUED AND/OR USED TO REIMBURSE THE CITY]. Section 3. The expenditures with respect to which the City reasonably expects to be reimbursed from the proceeds of Reimbursement Bonds will be made from the City's Fund [STATE WHICH FUND WILL BE USED TO INITIALLY PAY FOR THE PROJECT] for project costs related to the City's [DESCRIBE PROJECT]. Dated this day of , 20 . , Authorized Representative 219 PA II C Municipal Bonds: Reimbursement Rules Issuers of governmental bonds, qualified 501(c)(3) bonds, and private activity bonds issued for the purpose of financing governmentally owned facilities, may allocate all or a portion of the proceeds of such bonds to the reimbursement of expenditures made prior to the date of issuance if certain rules are followed.These bonds are referred to as "reimbursement bonds." If the rules are followed,the portion of the proceeds allocated to the reimbursement will be considered "spent" when the allocation is made, and will not be subject to the general arbitrage and rebate rules imposed under the Internal Revenue Code of 1986, as amended (the "Code") and the federal tax regulations(the "Regulations"). The following is a summary of the general requirements for qualifying reimbursements. Official Intent Declaration Requirement. The issuer, or in limited circumstances the ultimate borrower, must declare its "official intent"to reimburse itself not later than 60 days after payment of the original expenditure.The declaration of official intent may be made before any expenditures are made, and will essentially"start the clock"for purposes of reimbursement.The official intent declaration must include the following requirements: • The declaration may be made in any reasonable form, including a resolution or other legislative authorization.The legislative action may specifically declare the intent to reimburse or may delegate to an individual the authority to make the declaration. • The declaration of official intent must: o contain a general functional description of the project, property or program to be financed by the reimbursement bonds (for instance, highway capital improvement program or school building renovation).The project description is sufficient if it identifies, by name and functional purpose,the fund or account from which the original expenditure is paid (for instance, parks and recreation fund-recreational facility capital improvement program); and o state the maximum principal amount of the obligations expected to be issued for the project. The Regulations allow for reasonable deviations in the project description, so long as the actual project is reasonably related in function to the described project. • The declaration of intent must be "reasonable." A declaration of intent will be considered reasonable if, on the date of the declaration,the issuer or ultimate borrower had a reasonable expectation that it would reimburse the original expenditure with proceeds of reimbursement bonds. Reasonableness is based on the relevant facts and circumstances, including the issuer's history of making declarations and actually reimbursing expenditures. For instance, declarations of intent made as a matter of course or in amounts substantially in excess of the amounts expected to be necessary for the project are not reasonable. Similarly, a pattern of failing to reimburse original 220 expenditures covered by declarations of official intent (other than due to extraordinary circumstances) is evidence of unreasonableness. Eligible Expenditures. Generally,the expenditures to be reimbursed must be "capital expenditures."A capital expenditure is any cost of a type that is properly chargeable to a capital account (or would be so chargeable with a proper election) under general federal income tax principles.The Regulations also include extraordinary working capital expenditures, bond costs of issuance, grants, qualified student loans, and qualified mortgage loans as expenditures eligible for reimbursement. Non-extraordinary working capital expenditures are typically not eligible.The determination of whether an expenditure is a capital expenditure is made at the time the expenditure is made, not at the time of issuance of the reimbursement bonds. Reimbursement Period.The reimbursement bonds must be issued and proceeds must be allocated to reimburse the issuer or conduit borrower not later than 18 months after the later of: • The date on which the original expenditure is paid, or • The date that the project to be financed was placed in service, but in no event more than three years after the original expenditure is paid. Special rules apply for governmental issuers that expect to issue no more than $5 million of governmental bonds in any calendar year, and for long term construction projects. Proceeds of reimbursement bonds will be "allocated"to reimbursement once there is written evidence of an issuer's (or conduit borrower's) use of the proceeds to reimburse a prior expenditure. An allocation made within 30 days of issuance of the reimbursement bonds may be treated as made on the date of issuance of the reimbursement bonds. Special Exceptions. The official intent declaration requirement and the timing of issuance of reimbursement bonds do not apply to: • costs of issuance for a bond issue; • an amount not in excess of the lesser of$100,000 or 5%of the bond proceeds; or • preliminary expenditures not in excess of 20%of the aggregate issue price of the related reimbursement bond issue. Preliminary expenditures include architectural, engineering, surveying, soil testing, reimbursement bond issuance, and similar costs that are incurred before commencement of acquisition, construction or rehabilitation of the financed property. Land acquisition, site preparation and other costs incident to commencement of construction do not constitute preliminary expenditures. Original expenditures in these categories may be reimbursed with bond proceeds without following the reimbursement bond rules. Pacifica Law Group LLP 1191 2nd Avenue,Suite 2000 I Seattle,WA 98101 206.245.1700 www.pacificalawgroup.com 221